Through my experience as CEO of simplefox GmbH, an IT and software company based in Kiel that focuses on web and mobile development for leading companies, SMEs, and startups worldwide, I have gotten to know a large number of startups from various industries and am presented with new ideas and concepts for possible developments on a weekly basis. 

The focus here is on web platforms, e-commerce shops, business websites, software-as-a-service models, and mobile apps, which we have specialized in developing over the past few years. As a technical service provider, we implement such ideas and concepts in close collaboration with founding teams. I would like to share with you the experience we have gained from this. 

1. Business idea

I often receive encrypted or only partially disclosed business ideas from founders about their startups, as these are treated as strictly secret and confidential – this is usually the first mistake. The idea itself is worthless, and you can be pretty sure that this very idea already exists in various forms and has most likely already been pursued.
From the idea to implementation to a functioning product, it is a long road with many obstacles, and with just the idea itself, you have not yet overcome any of these hurdles. 

Tip #1
Don't hold yourself and your project back by keeping your idea or concept under wraps. Comprehensive feedback and well-founded criticism are essential for assessing and developing your business idea – talk about it and gather important experiences and opinions from others in order to evaluate and improve your concept.

2. Concept / Business plan

Once the idea for a potential startup has been established, the concept phase begins. This is where startups differ significantly. Some are very committed to developing a concept, while others still do not have a business plan and will not need one in written form. In any case, it is important to work in a structured manner and to record the key considerations and key figures of your idea. During this process, the team engages more intensively with the project and often encounters important considerations for the first time.

I don't think much of a business plan that has been worked out down to the last detail, as it will almost certainly be turned upside down after just a few months. 

Tip #2
Work with a concept, structure your thoughts, and calculate as best you can. Don't forget to remain agile and be prepared for different scenarios, because things will most likely turn out differently than initially planned. 

The most important questions for compiling and developing your business plan

To thoroughly examine your startup and business idea, I recommend answering the following questions in detail. If you encounter significant difficulties in doing so, this would be an appropriate time to reconsider the idea rationally.

  1. What stage (phase) is your startup in? (You can find more information about the different phases here.)
  2. Has your startup reached certain milestones, regardless of revenue or profit? For example, do you already have customers or users? Do you already have contracts with employees or suppliers?
  3. What is your main business model?
  4. What is the primary target audience for your product or service? 
  5. What do you think is the unique selling point of your product or service?
  6. What is the main problem faced by customers who might find your product or service interesting?
  7. How does your startup solve this problem? 
  8. Are there already known competitors, or are you the first on the market?
  9. What do you estimate the annual percentage growth in your target market will be over the next five years?
  10. In which market will you primarily sell your product or service for the time being?
  11. How much capital do you need for your startup?
  12. How many investors have already invested in the startup, hold shares in the company, or will it be possible without investors?
  13. What will the capital raised mainly be used for?

3. Founders & Team Lineup

The most important factor with the greatest potential for conflict is the composition of the founding team. Even when analyzing the founding team and identifying areas of expertise, it is possible to determine a large part of the future success rate, and this is precisely where projects usually fail before they even get off the ground. A typical example here: "We have an innovative idea for a new app. Currently, there are four of us in the team: two business students, a law graduate, and someone else for sales and marketing...now we're looking for someone to develop the app for us."

Without evaluating the different skills in more detail, this combination of founding team members is highly unlikely to be a huge success. 

It is often assumed that the founding team must already cover all areas of expertise, but this is a misconception and virtually impossible to achieve.

Tip #3
Analyze your team. Successful founding teams usually consist of no more than two founders with outstanding areas of expertise and an inseparable, harmonious working relationship. 

4. Motivation / Commitment / Perseverance

Motivation and commitment are essential for a successful startup. Too often, people think that a successful startup can be launched on the side, perhaps even alongside a regular 40-hour working week. This is not the case and requires absolute dedication and total commitment.

If this is not feasible due to time constraints and financial circumstances, then this would be another point at which it would be better not to pursue the dream of starting a business.

In addition, it is said that a startup needs at least five years on average to achieve sufficient stability or to generate enough revenue to support the company, including all employees and fixed costs. I can only confirm this, even though I wouldn't have believed it at first. 

Developing a marketable product takes time, and then there is the matter of building networks, establishing the brand, and generating enough customers. 

For many very large startups, investors and annual financing rounds play a key role in this. In the digital age, the necessary reach can only be achieved by spending large sums on marketing. The strategy behind your business should therefore be carefully considered in advance.

Tip #4
A successful business does not develop on the side. Only with complete commitment and long-term perseverance, combined with constant optimization over many years, can a stable company emerge behind the product. 

5. The budget – How much is needed?

There is hardly any aspect that is more difficult for a startup to calculate at the beginning. Especially when it comes to web and mobile development, there is often a lack of expertise and experience to clarify the necessary budget issues in advance. 

From the initial idea to the first working product (MVP), there are many milestones and obstacles that require detailed calculation. This makes it all the more important to have experts in this field on board, either as part of your own team or as professional and reliable consultants, so that you can assess the budgetary requirements as accurately as possible in advance.

So how much does a mobile app or a business website actually cost? 

As you can imagine, this always depends on your requirements and technological demands. In web and app development, products can be developed for any budget. 

Tip #5
Here are the most important points for budget recording:

  1. First develop a prototype in-house

This process helps you understand your product in detail.

  1. Focus on the MVP (minimum viable product) 

It is important to start working on the customer as soon as possible and launch the first marketable version of your product. 

  1. In addition to the budget for development, make sure you allocate sufficient funds for the rollout.

Please note: You should expect to spend 2-3 times the budget you have already allocated for development; in 80% of cases, this is greatly underestimated.

  1. Start with a free version that already includes all essential features.

For several years now, this has been by far the most successful model and the only way to generate enough interest in your product. Premium subscription models based on premium features enable you to ultimately convert users into paying customers.

6. The search for investors

Finding suitable investors is a difficult task and, unfortunately, almost indispensable for successful app or web development these days. This sector requires a budget, and even if, for example, a web platform or mobile app can be developed in-house, bottlenecks often arise when it comes to rollout and marketing. Without paid advertising, you will hardly have a chance to publicize your product these days. I myself have witnessed this countless times, despite careful discussions in advance. The budget for development was there and a first marketable product was created, but then there was a lack of liquidity for proper marketing and distribution. But be careful, the search for investors must be approached with caution.

Tip #6
Here are the most important tips for finding investors:

  1. Investors don't invest in an idea, but in a functioning product. So don't get your hopes up too high that you'll find suitable investors based solely on your business plan. Although there are cases where this happens, such "partnerships" should be treated with extreme caution.
  2. Don't sell yourself short in advance for a sum that you can't really estimate at this point. A million sounds like a lot, right? Would you give up more than 50% of your shares for that?
  3. Not only the investment amount, but also the decision-making power that often results from it plays an important role. This can lead to significant conflicts, which can be avoided by carefully selecting suitable investors. A quick cash flow should not be the only factor; the character and vision of the investor also play an important role in future cooperation.

Afterword

I hope this article helps you get started and avoid initial mistakes, enabling you to successfully master the first milestones. If you need advice or assistance, please feel free to contact us. We ourselves have successfully completed all of the steps mentioned above in recent years and are currently in our fifth year since founding the company.